ConocoPhillips buying Marathon Oil in US$17b all-stock deal

ConocoPhillips is buying Marathon Oil in an all-stock deal valued at approximately US$17.1 billion as energy prices rise and big oil companies reap massive profits.

The deal is valued at US$22.5 billion when including US$5.4 billion in debt.

Crude prices have jumped more than 12 per cent this year and the cost for a barrel rose above US$80 this week. Oil majors put up record profits after Russia’s invasion of Ukraine in 2022 and while those numbers have slipped, there has been a surge in mergers between energy companies flush with cash.

Chevron said last year that it was buying Hess in a US$53-billion acquisition, though that deal faces headwinds. The company warned the buyout may be in jeopardy because it will require the approval of Exxon Mobil and a Chinese national oil company, which both hold rights to development of an oilfield off the coast of the South American nation Guyana, where Hess is a big player.

In July of last year, Exxon Mobil said that it would pay US$4.9 billion for Denbury Resources, an oil and gas producer that has entered the business of capturing and storing carbon and stands to benefit from changes in US climate policy. Three months later, Exxon announced the proposed acquisition of shale operator Pioneer Natural Resources for US$60 billion.

All of the proposed acquisitions could face pushback from the United States which, under the Biden administration, has stepped up antitrust reviews for energy companies and other sectors as well, such as tech.

The US Federal Trade Commission, which enforces federal antitrust law, asked for additional information from Exxon and Pioneer about their proposed deal. The request is a step the agency takes when reviewing whether a merger could be anti-competitive under US law. Pioneer disclosed the request in a filing in January.

As part of the ConocoPhillips transaction, Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock that they own, the companies said on Wednesday.

ConocoPhillips said on Wednesday that the transaction will add highly desired acreage to its existing US onshore portfolio.

“This acquisition of Marathon Oil further deepens our portfolio and fits within our financial framework, adding high-quality, low cost of supply inventory adjacent to our leading US unconventional position,” ConocoPhillips Chairman and CEO Ryan Lance said in a prepared statement.

The deal is expected to close in the fourth quarter. It still needs approval from Marathon Oil stockholders.

Separate from the transaction, ConocoPhillips said that it anticipates raising its ordinary dividend by 34 per cent to 78 cents per share, starting in the fourth quarter. The company said that once the Marathon Oil deal closes and assuming recent commodity prices, ConocoPhillips plans to buy back more than US$7 billion in shares in the first full year. It plans to repurchase more than US$20 billion in shares in the first three years.

AP